Sole Proprietorship Overview: Legal Structure

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Sole Proprietorship Overview

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Sole Proprietorship Overview

This form of business is the easiest to start because you need obtain only whatever licenses that are required in order to begin business operation. The sole proprietorship gives you absolute control over your business, more so than other business structures such as partnerships or corporations. Very often, a small business owner will choose to start with a proprietorship. As the business grows, he or she might explore the possibility of forming a partnership or a corporation.

You will need to contact your local county or city clerk’s office to determine what is required in order to operate a business in your area. If your business involves the sale of a product or service in other states, you may need to obtain a federal license or permit.

The Department of Commerce in Washington, D.C., can give the necessary information for obtaining a license for interstate commerce.

The sole proprietor’s income from the business is treated as personal income. You can declare this income as part of Schedule C, Profit and Loss from a Business or Profession, with a standard 1040 Federal Individual Income tax return. You will also need Form 1040ES, Declaration of Estimated Tax for Individuals. The IRS will supply you with vouchers for submission of quarterly estimated tax payments. These payments are made in January, April, June, and September.

* Source Streetwise Small Business Start-Up

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